House Passes Tax Reform Bill, Sending it to Senate
The House of Representatives passed a reconciliation bill on May 22, 2025 that cuts taxes, cuts spending, and increases border security and defense spending. The bill, known as One Big Beautiful Bill, extends the expiring tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA), makes changes to corporate and international taxes, and reduces energy tax credits. The bill also reduces spending on social safety net programs, including Medicaid and the Supplemental Nutrition Assistance Program (SNAP), by more than $1 trillion; and raises the debt ceiling by $4 trillion. The Congressional Budget Office projects that the bill would add $3.8 trillion to the national debt over 10 years (the debt currently exceeds $36 trillion).
The House passed the bill by a vote of 215-214-1, with Republicans Thomas Massie of Kentucky and Warren Davidson of Ohio voting with Democrats against the bill. Andy Harris of Maryland, the leader of the House Freedom Caucus, voted present. Andrew Garbarino of New York and David Schweikert of Arizona missed the vote but support the bill. The bill now goes to the Senate, which is expected to make further changes. Key provisions in the House bill include:
Individual Tax Provisions
Make TCJA rates permanent: The bill would make the TCJA rate and bracket changes permanent.
Increase standard deduction: The bill would increase the standard deduction by $1,000 to $16,000 for individuals, by $1,500 for head of household filers, and by $2,000 to $32,000 for joint filers through the end of 2028.
Eliminate personal exemption: The bill would make permanent the personal exemption elimination enacted by the TCJA.
Increase SALT deduction limit: The bill would increase the limit on state and local tax deductions (SALT) from the current $10,000 to $40,000 for incomes up to $500,000. The cap is reduced to $10,000 at a 30% rate for taxpayers with incomes of more than $500,000. The thresholds for the cap and income will increase 1% each year over 10 years.
Increase and make permanent the child tax credit: The bill would increase the child tax credit by $500 to $2,500 per child for 2025 through 2028. The maximum credit would be inflation adjusted after 2028, making the credit permanent.
Temporarily make overtime pay deductible: The bill would allow a deduction for overtime pay from taxation through 2028. This excludes highly compensated employees and certain tips.
Temporarily make tips deductible: The bill would allow a deduction for tipped wages from taxes for tax years 2025 through 2028. This would apply to individuals in traditionally tipped industries and exclude highly paid employees.
Temporarily increase standard deduction for seniors: The bill would increase the standard deduction for seniors by $4,000 to $19,000 for tax years 2025 through 2028. The deduction would phase out according to income.
Temporarily make auto loan interest deductible: The bill would make the interest from auto loans fully deductible for tax years 2025 through 2028 for autos with final assembly in the United States. The deduction would be limited to $10,000 and would phase out according to income.
Repeal individual energy credits: The bill would repeal energy tax credits for individuals, including the electric vehicle tax credit and the residential energy efficiency credits in the Inflation Reduction Act (IRA).
Increase QBI deduction: The bill would increase the Section 199A deduction for qualified business income (QBI) from 20% to 23%.
Estate Tax Provisions
Increase estate tax exemption: The bill would increase the estate tax exemption to $15 million beginning in 2026 and make it adjusted for inflation for subsequent years.
Business Tax Provisions
Temporarily allow immediate R&D expensing: The bill would allow business taxpayers to fully expense Section 174 domestic research and development (R&D) costs in the year they occur for tax years 2025 through 2029.
Increases small business expensing: The bill would increase the Section 179 Small Business Expensing Cap from $1.25 million to $2.5 million per year. The bill also increases the phase-out threshold from $2.5 million to $4 million.
Temporarily allow bonus depreciation: The bill will allow 100% bonus depreciation for short-lived investment from 2025 through 2029.
Temporarily reinstate EBITDA interest deduction limit: The bill would restore EBITDA-based limitation on business interest deductions under Section 163(j) from 2025 through 2029.
Temporarily allow 100% expensing of qualifying structures: The bill would allow 100% expensing of qualifying structures in manufacturing, extraction, and agriculture sectors, with certain begin construction and placed in service requirements.
Reduces corporate charitable deduction: The bill would allow a corporate deduction for charitable contributions only to the extent that contributions exceed 1% of a corporation’s taxable income.
Energy Tax Credits
Repeal major clean energy tax credits: The bill repeals and phases out clean energy tax credits. This includes various production tax credits and investment tax credits for clean electricity, nuclear electricity, and hydrogen.
International Tax Provisions
Permanently increase GILTI deduction: The bill would increase the global intangible low taxed income (GILTI) deduction to 49.2% after 2025. This replaces the scheduled post-2025 reduction to 37.5%.
Increase FDII deduction: The bill would increase the foreign-derived intangible income (FDII) deduction to 36.5%. This replaces the scheduled post-2025 reduction to 21.875%.
Decrease BEAT rate: It would also decrease the base erosion and anti-abuse tax (BEAT) rate from 12.5% to 10.1%.
Implement retaliatory measures against “unfair taxes”: The bill would implement Section 899, which allows the government to impose retaliatory taxes up to 20% against countries, individuals, and entities of countries that have enacted any “unfair foreign tax.”